May 7, 2012 Newletter

Tangents:

Would you set sail on a ship whose name and legacy is synonymous with tragedy and failure? Well an Australian billionaire is sure betting people will! Clive Palmer announced last Monday that he has signed a memorandum of understanding with state-owned Chinese company CSC Jinling Shipyard to build the Titanic II.

Mr. Palmer didn’t give any estimates about how much the project is going to cost, but he did state that “it will be every bit as luxurious as the original Titanic, but … will have state-of-the-art 21st-century technology and the latest navigation and safety systems.”

Titanic II’s maiden voyage is scheduled sometime in late 2016, so you too can set sail on “a tribute to the spirit of the men and women who worked on the original Titanic.”

However, I bet if you do end up going, there is going to be a huge lineup at the prow of the ship of people waiting to shout “I’m king of the world!” a la Jack and Rose from James Cameron’s 1997 film!

You can read more about it here: http://www.theglobeandmail.com/news/world/titanic-ii-australian-billionaire-says-replica-ship-will-set-sail-in-2016/article2417552/?utm_medium=Feeds%3A+RSS%2FAtom&utm_source=World&utm_content=2417552&fb_ref=homepage

photos of the day May 7, 2012

A full moon rises over the skyline of Lower Manhattan and One World Trade Center (l.) in New York.- Gary Hershorn/Reuters

A traditional dance group celebrates the Palm and Flowers Festival through the streets of Panchimalco, El Salvador.- Ulises Rodriguez/Reuters

Market Closes for May 7, 2012:

North American Markets

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Joseph Ciolli

May 7 (Bloomberg) — Canadian stocks fell for a fourth day as energy and materials shares dropped after European elections stoked speculation that austerity efforts will be derailed, escalating the debt crisis.

Oil and gas explorer Nexen Inc. declined 2.9 percent after saying it would abandon an unsuccessful deepwater well in the Gulf of Mexico. Penn West Petroleum Ltd. dropped 3.5 percent after reporting lower-than-forecast first-quarter sales.

Goldcorp Inc., the world’s second-biggest producer of the metal, declined 1.4 percent. Potash Corp. of Saskatchewan Inc., the biggest fertilizer company, fell 1 percent.

The Standard & Poor’s/TSX Composite Index decreased 10.57 points, or 0.1 percent, to 11,860.66 in Toronto.

“People are shocked about the election results, so confidence about trying to solve the debt crisis has fallen,” Sebastian van Berkom, a money manager at Van Berkom & Associates in Montreal, said in a telephone interview. The firm oversees about C$1.8 billion ($1.8 billion).

Canadian stocks retreated last week after two straight weekly gains as Spain entered a recession, a U.S. industry report showed employers added fewer jobs than forecast last month and commodity prices dropped. Energy and mining shares account for 44 percent of Canadian stocks by market value, compared with 20 percent in the U.S.

Energy companies declined as oil fell to a three month low after France elected Francois Hollande president and Greek voters picked anti-bailout parties. Hollande, who will become the first Socialist in 17 years to control Europe’s second- biggest economy, pledged to push for less austerity and more growth.

Nexen fell 2.9 percent to C$17.26. The energy producer with operations on five continents said it didn’t find hydrocarbons at the deepwater exploration well, which is being plugged and abandoned.

Penn West Petroleum, a western Canadian oil and gas company, dropped 3.5 percent to C$15.06 after reporting first- quarter sales of C$728 million, falling short of the average analyst estimate of C$841 million.

Africa Oil Corp. surged 35 percent to C$7.82, its highest price in more than 15 years. The Vancouver-based exploration company found additional oil in Kenya.

Materials stocks in the S&P/TSX decreased as gold futures dropped after election results in France and Greece eroded prospects for European debt reduction, curbing demand for the metal as an alternative for investors shifting out of the euro and into dollar assets perceived as safer.

Goldcorp declined 1.4 percent to C$35.93. Yamana Gold Inc., Canada’s third-largest company in the industry by market value, dropped 2.6 percent to C$13.73.

Potash Corp. fell 1 percent to C$41.89. Agrium Inc., a fertilizer producer and farm retailer, decreased 0.7 percent to C$84.25.

Molybdenum producer Thompson Creek Metals Co. plunged 16 percent, the most since November 2008, to C$4.61. The company said it intends to offer senior notes and tangible equity units, raising money to fund the construction of its Mt. Milligan copper-gold mine.

Contract driller Ensign Energy Services Inc. climbed 1.7 percent to C$13.90 after reporting first-quarter earnings excluding some items of 69 Canadian cents per share, exceeding the average analyst estimate of 54 Canadian cents.

US

By Michael P. Regan and Rita Nazareth

May 7 (Bloomberg) — Most U.S. stocks rose, led by banks, after billionaire investor Warren Buffett said American lenders are in “fine shape.” The euro slid for a sixth day and commodities fell after French Socialist Francois Hollande was elected president and Greek voters picked anti-bailout parties.

The Standard & Poor’s 500 Index added less than 0.1 percent to 1,369.58 at 4 p.m. in New York as six stocks gained for every five that fell on U.S. exchanges. The euro lost 0.3 percent to $1.3051 as the shared currency extended its longest losing streak since September. Ten-year French yields slipped three points to 2.80 percent and the CAC-40 Index of stocks rallied 1.7 percent. The S&P GSCI Index of commodities fell for a fourth day, declining 0.2 percent. Ten-year U.S. Treasury yields were little changed at 1.88 percent.

Financial shares rose 0.7 percent as a group to lead gains among the 10 main industries in the S&P 500 after Buffett said U.S. lenders have “liquidity coming out of their ears.”

Speculation that European austerity measures will be curbed grew after Hollande’s victory made him the first Socialist to take the helm of Europe’s second-biggest economy in 17 years. The Greek parliament will have three new anti-bailout parties represented.

“Every time Buffett gives the seal of approval, it helps certain stocks or segments of stocks,” Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a telephone interview. “As for Europe, we’ve priced in some of what’s happened. Yet investors are not really quite sure of what to make of those trends.”

U.S. stocks rebounded from early losses, including a 1.5 percent drop in S&P 500 futures before exchanges opened in New York. The S&P 500 halted a three-day slump. The index tumbled 2.4 percent last week, its biggest drop of the year, as data on American and European labor markets boosted concern the global economy is weakening. The benchmark gauge of U.S. stocks has retreated 3.5 percent from an almost four-year high on April 2.

Walt Disney Co. rallied 2.1 percent after “Marvel’s The Avengers” set box-office records with $200.3 million in ticket sales over the weekend. Fifth Third Bancorp and Bank of America Corp. rose almost 3 percent each, pacing gains in financial shares, after Buffett said U.S. lenders have “liquidity coming out of their ears.”

“I would put European banks and American banks in two very different categories,” Buffett, Berkshire Hathaway Inc.’s chairman and chief executive officer, said May 5 at the firm’s annual meeting in Omaha, Nebraska. “The American banking system is in fine shape. The European system was gasping for air a few months back” before getting assistance from the European Central Bank.

Hewlett-Packard Co. and Caterpillar Inc. lost more than 1.2 percent to lead the Dow Jones Industrial Average down 29.74 points to 13,008.53. The Dow and S&P 500 drifted between gains and losses for much for much of the day. American International Group Inc. dropped 3 percent as the U.S. Treasury Department agreed to sell $5 billion of shares, with the bailed-out insurer buying $2 billion of the total.

Risk perceptions among U.S. equity and credit investors are diverging by the most since 2009 as signs of an economic slowdown spur bigger increases in prices to protect against losses in bonds than stocks. The VIX, the benchmark gauge of U.S. equity derivatives that usually rises when shares fall, closed last week at 0.032 times the level of the Markit CDX North America High Yield Index, which increases when confidence in debt issuers deteriorates, according to data compiled by Bloomberg. That’s near the 2 1/2-year low of 0.027 times reached in March.

European stocks rose the most in more than a week as German Chancellor Angela Merkel said she will receive French president- elect Hollande with “open arms” as they work together to tackle the debt crisis. Hollande’s platform calls for policies Merkel opposes, including increased spending and a delayed deficit-reduction effort

The Stoxx Europe 600 Index reversed early losses to climb 0.7 percent, even as Greece’s ASE Index plunged 6.7 percent in its worst drop since November. National Bank of Greece SA tumbled 8.3 percent. Roche Holding AG fell 3.5 percent, the most since November, after abandoning development of an experimental cholesterol drug. CSM NV, the world’s biggest maker of bakery ingredients, jumped 19 percent after saying it will sell its U.S. and European bakery-supply units.

Benchmark stock indexes in Italy and Spain led gains, rallying more than 2.5 percent each. Among European bond markets, Italy’s 10-year yield lost three basis points to 5.40 percent and Spain’s increased two points to 5.76 percent.

The euro weakened against 14 of 16 major peers. The shared pared losses after dipping below $1.30 for the first time since April 16, and slid 0.5 percent versus the pound. The Dollar Index, which tracks the U.S. currency against those of six trading partners, advanced 0.1 percent, rising for a sixth day in the longest streak since September “Incumbents took a beating across Europe this weekend in what has been widely interpreted as a backlash against austerity,” Michala Marcussen, global head of economics at Societe Generale SA in Paris, wrote in a report today. “Failure to secure a political majority to meet the terms of the second Greek program could see the country inch towards euro exit. This would in our opinion be seen as a negative event, even beyond Greece’s borders.”

The euro is confounding bears who predicted a meltdown as it gets an unexpected boost from the economic and political turmoil gripping Europe. The 17-nation currency has risen about 1 percent against nine peers from this year’s low on Jan. 16, while the dollar slid 2.3 percent, data compiled by Bloomberg show. Futures traders are trimming bets that it will fall against the dollar, while options show investors are less bearish.

In other European elections, Merkel’s party had its worst election result in more than half a century in the state of Schleswig-Holstein. Austerity measures aimed at stemming Europe’s turmoil have driven economies from the Netherlands to Spain back into recession, emboldening politicians campaigning for growth.

A reduction in austerity could put more pressure on the European Central Bank to act, according to David R. Kotok, Cumberland Advisors’ chairman and chief investment officer.

“Political momentum moves toward more monetary ease,” Kotok wrote in a note to clients. “We expect some form of balance sheet expansion before the end of this year. We expect credit spreads of weaker sovereigns to widen until the ECB enters the market or discusses that it may do so.”

Cotton, silver and soybeans dropped at least 0.9 percent to lead the S&P GSCI index lower. Crude oil slipped 0.6 percent to $97.94 a barrel, the lowest settlement price in three months.

Have a wonderful evening everyone.

Kindest Regards,

Ellora Howie

Assistant to Carolann Steinhoff

Queensbury Securities Inc.,

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8X 3Y7